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RITE AID CORPORATION v. LIBERTY MUTUAL FIRE INSURANCE CO.

June 7, 2005.

RITE AID CORPORATION, Plaintiff,
v.
LIBERTY MUTUAL FIRE INSURANCE CO., et al., Defendants.



The opinion of the court was delivered by: YVETTE KANE, District Judge

MEMORANDUM AND ORDER

Before the Court are cross motions for summary judgment. (Doc. Nos. 70 and 73.) The motions have been fully briefed and are ripe for disposition. For the reasons that follow, Plaintiff's motion for summary judgment will be granted in part and denied in part, and Defendant's motion for summary judgment will be granted in part and denied in part.

I. Background*fn1

  This insurance dispute originated from a February 9, 2001 Demand for Arbitration filed by Beth Kaplan ("Kaplan"), a former executive officer of Plaintiff Rite Aid Corporation, asserting numerous claims against Plaintiff. In August 1996, Ms. Kaplan left her Vice President position with Proctor & Gamble to become a senior executive in charge of Plaintiff's Cosmetics and Fragrance Division. According to Kaplan, her decision to sign an employment contract with Plaintiff was based in part on information found within Plaintiff's public disclosures, annual reports, and SEC filings. After two and a half years, Plaintiff became embroiled in stockholder lawsuits and regulatory investigations regarding certain financial practices conducted by Plaintiff's management. These financial irregularities resulted in a $1.6 billion correction to prior years' earnings, dramatic reduction in Plaintiff's stock price, and criminal prosecution of members of Plaintiff's management. On November 12, 1999, Kaplan terminated her employment agreement with Plaintiff and resigned from the company.

  In her Demand for Arbitration, Kaplan alleged, inter alia, that Plaintiff had negligently or intentionally misrepresented its financial strength in documents given to her prior to her employment, thereby fraudulently or negligently inducing her to take employment with a company financially weaker than advertised. Kaplan also alleged that the taint of association with Plaintiff handicapped her ability to secure employment commensurate with her experience.

  Defendant Liberty Mutual issued a Commercial General Liability policy to Plaintiff for years 1997, 1998, and 1999 ("Policy"). During all times relevant hereto, Plaintiff was also covered by an Employment Practices Liability Insurance policy issued by Zurich American Insurance ("Zurich"). By letter dated July 6, 2001, Plaintiff notified Zurich of the arbitration. By letter dated August 27, 2001, Plaintiff notified Defendant of the arbitration with Kaplan.

  On November 14, 2002, an arbitration panel issued a ruling awarding Kaplan nearly $5,000,000, plus interest, in damages, but finding for Plaintiff on Kaplan's claims for pre-employment misrepresentations and injury to reputation. On January 22, 2003, Plaintiff and Kaplan entered a confidential settlement agreement.

  II. Procedural History

  On September 26, 2003, Defendant commenced an action in the United States District Court for the Northern District of California, seeking declaratory judgment with respect to potential liability under the Policy. On October 8, 2003, Plaintiff initiated the instant action against Defendant, Zurich, and Federal Insurance Company ("Federal Insurance"), asserting breach of contract and bad faith under the Pennsylvania Bad Faith statute, 42 Pa. Cons. Stat. Ann. ยง 8371. In addition, Plaintiff moved to transfer the California action to this Court, or in the alternative, dismiss the action. On December 18, 2003, the California court transferred Defendant's declaratory judgment action to this Court, whereupon this Court dismissed the case as unnecessarily duplicative to the instant litigation.

  On February 11, 2004, Plaintiff filed an amended complaint. (Doc. No. 29.) On February 15, 2005, Plaintiff filed its instant motion for summary judgment. (Doc. No. 70.) On February 18, 2005, Defendant filed its motion for summary judgment. (Doc. No. 73.) On February 18, 2005 and March 18, 2005, Plaintiff voluntarily dismissed Zurich and Federal Insurance respectively from this case.

  III. Summary Judgment Standard

  Summary judgment is proper where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56; White v. Westinghouse Elec. Co., 862 F.2d 56, 59 (3d Cir. 1988). A factual dispute is material if it might affect the outcome of the suit under the applicable law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A factual dispute is genuine only if there is a sufficient evidentiary basis that would allow a reasonable fact-finder to return a verdict for the non-moving party. Id. at 249. The evidence presented must be viewed in the light most favorable to the non-moving party. Id. "The inquiry is whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one sided that one party must, as a matter of law, prevail over the other." Id. This standard does not change by virtue of cross-motions being presented. United States v. Hall, 730 F. Supp. 646, 648 (M.D. Pa. 1990).

  The moving party has the initial burden of identifying evidence that it believes shows an absence of a genuine issue of material fact. Childers v. Joseph, 842 F.2d 689, 694 (3d Cir. 1988). Once the moving party has shown that there is an absence of evidence to support the non-moving party's claims, the non-moving party may not simply sit back and rest on the allegations in the complaint. Instead, the non-moving party must "go beyond the pleadings and by [its] own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial." Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). The evidence must be viewed in the light most favorable to the non-movant. See Groman v. Township of Manalapan, 47 F.3d 628, 633 (3d Cir. 1995). Summary judgment should be granted where a party "fails to make a showing sufficient to establish the existence of an element essential to that party's case and on which that party will bear the burden at trial." Celotex, 477 U.S. at 322.

  With respect to the sufficiency of the evidence that the nonmoving party must provide, a court should grant summary judgment where the nonmovant's evidence is merely colorable, conclusory or speculative. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986). There must be more than a scintilla of evidence supporting the nonmoving part and more than some metaphysical doubt as to the ...


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